Can Beyond Meat Stop The Downward Spiral?

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Written By Kevin MacDonald

Beyond Meat has faced significant struggles over the past few years, with its once-promising market position in the meat alternatives category experiencing substantial declines.

Despite initial hype and rapid revenue growth, the company now faces a challenging financial outlook, with a marked reduction in sales and profitability.

Revenue and Market Dynamics

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The meat alternatives market, which saw substantial growth and attention a few years ago, peaked in mid-2021. Since then, the market has experienced significant declines. For instance, refrigerated meat alternative sales fell by 26% during the 52-week period ending July 2023 compared to 2021.

Beyond Meat has not only faced this overall market decline but has also lost market share to competitors.

As a result, Beyond Meat’s revenue has significantly decreased. From a peak of $465 million in 2021, the company reported $419 million in net revenues for 2022 and $343 million for 2023. The company’s guidance for 2024 projects net revenues between $315 million and $345 million.

Profit Margins and Financial Health

Beyond Meat’s gross profit margins have also been under pressure. In 2023, the company reported a -24% gross profit margin, influenced by $67.5 million in non-cash charges such as write-offs. Adjusting for these charges, the gross profit margin would still be negative at -4%.

While there was a slight improvement to approximately +5% in Q1 2024, the company expects full-year 2024 gross margins to be in the mid-to-high teens.

For 2024, Beyond Meat anticipates $315 million to $345 million in net revenues. If the company achieves $330 million in net revenues with a 12% gross margin, it would generate around $40 million in gross profit.

However, with projected operating expenses of $180 million and capital expenditures of $20 million, the estimated cash burn for 2024 would be around $110 million, excluding working capital changes.

Beyond Meat started 2024 with approximately $193 million in cash, which means it could end the year with around $83 million in cash, assuming no changes in working capital.

Long-term Outlook and Valuation

Looking ahead to 2025, a relatively positive scenario could involve 9% revenue growth to $360 million and a gross margin increase to 25%, resulting in $90 million in gross profit. If operating expenses are reduced to $115 million, the total cash expenses for 2025 would be around $122 million, including $7.25 million for a consumer class action settlement.

This scenario would lead to a $52 million cash burn for 2025, leaving Beyond Meat with $31 million in cash at the end of the year without additional equity raises.

Despite these projections, Beyond Meat’s intrinsic value appears to be zero, primarily due to its ongoing negative EBITDA and significant debt burden. The company has $1.15 billion in 0% convertible senior notes due in March 2027, with a conversion price of $206 per share, far above the current trading price.

These notes are trading at around 22 cents on the dollar, indicating market skepticism about full repayment at maturity.

Challenges Ahead

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Beyond Meat’s challenges with market share and declining category sales have resulted in continued negative EBITDA and cash burn. While the company has enough cash to survive for a couple more years, it faces significant hurdles in addressing its 2027 convertible notes.

The most likely outcome is a restructuring, with noteholders potentially taking ownership of the company.

Given these factors, Beyond Meat is rated as a sell due to its lack of intrinsic value. However, shorting the stock is not attractive due to the high cost of borrowing and the company’s ability to continue operating for the next few years.


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